Commodity Market (Maize) Mexico and Usa

Topics: Maize, North American Free Trade Agreement, Mexico Pages: 10 (4078 words) Published: May 25, 2013
Commodity market (Maize) Mexico and USA
Summary:
* Corn as a commodity has a high importance in both Mexico and the USA * In the USA, the most of the corn is used to feed livestock and for bio-ethanol production * Mexico also produces corn for the livestock feed but most of its corn production is purposed for making “tortillas” which is the main aliment of Mexico’s citizens * With the NAFTA agreement Mexico has allowed itself to become dependent of highly subsidized cheap U.S corn * Many developing countries are beginning to emerge on the market and are starting to compete with the USA in corn trade * For Mexico it is important that the production is modernized in order to achieve its self-sufficiency and the USA should re-evaluate the increasing trend of using corn for bio-ethanol production

Introduction
Today, one of the most produced and a traded commodity is corn. It is being produced all over the world and the extent of trade has significantly increased in the recent history. Corn as a commodity has many uses for its production and one of the most important ones are livestock feed, production of bio-ethanol and many other purposes in food or similar industries. In this report, the writer has chosen to analyze two important corn producers who are both members of the NAFTA agreement. In the first part, the USA corn market will be analyzed with all the important factors such as production, exports, imports and price trends in the country. Furthermore, it will explain the reasons and the importance of corn production for the country. The next country which will be analyzed in the same manner is Mexico, but the analysis will be more extensive through the importance of corn for Mexican people and its cultural background. An example will be given of the future market use in Mexico for buying U.S. corn and the reasons for doing it. Finally the future prospective will be evaluated for both countries.

World Corn Trade
Corn is a commodity which is being traded in almost every part of the world due to its importance in the food and energy sector. The USA is one of the most important players in the world corn market and it accounts for 37% of the world corn production and 44% of the world’s export. The largest importers of US corn are Japan, Mexico and South Korea (Ye, 2011). The other important producers which follow behind the USA are China, Brazil, and Mexico (USDA, 2009). However, Argentina has taken its place as the second largest world exporter of corn. Every year it designs its production strategy by the success of the U.S. corn harvest whereas the production takes place in the southern hemisphere. Most of the other countries producers like Brazil, Ukraine, Romania and South Africa have a custom to store their corn until the market price increase to the acceptable level (USDA, 2013c). China as country exporter often brings confusion to the world market due to its inconsecutive release of its stock. The government is the one who chooses when to release the corn on the market and is difficult to predict it. The following graphs are clearly showing the state and trends of the World Corn Market. On the graphic of leading world exporters or corn can be seen the fluctuation of exports by these countries every year (Figure1). The main reason for this phenomenon could be caused by weather conditions but it can also be caused by many other factors. However, the graphic showing the leading world importers of corn demonstrates a constant stability of imports by these countries due to their constant need of corn for their livestock feed and many other purposes (Figure 2).

Figure 1: Source: (USDA, 2013c) Figure 2: Source: (USDA, 2013c)

Corn Market in the USA
The USA is today’s world leading producer and exporter of corn. With its high production rate it makes about 42% of total global supply and the surface on which the crop is grown reaches the high number of 35...

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